Chronicles of subcrime-3

(being 1 the ORIGINAL, namely in Ireland, Spain, UK and US; 2 the Centre-East EU transition countries 2009-10 collapse. In Phase 3 the € and EU are on the verge of chaos, because of the unsustainable costs-debts of Financial Socialism, plus country-specific stories adding up in a Deutsche uber alles divide)

ENGLISH SPEAKING SECTION OF THE POST on the Italian default.

With markets increasing pressure on Spain, Prime Minister José Luis Rodriguez Zapatero is running out of the political capital necessary to force through difficult reforms that could ease investor concerns.

After an Irish agreement with the EU/IMF, the market’s attention is likely to turn to Portugal’s sovereign, which at current levels of interest rates and growth rates, is less dramatically, but quietly, insolvent, in our view. We consider it likely that it will need to access the EFSF soon.

Greece is de facto insolvent, in our view, all the more so after the recent debt and deficit revisions. As long as Greece remains sufficiently compliant with the conditionality of its EU/IMF program, sovereign debt restructuring is likely to be postponed at least until mid-2013, when its EU/IMF programme expires. At that point, it likely will be transferred to the EFSF or its successor. Whether its debt will be restructured at that stage, including haircuts, will depend on factors beyond the sustainability of its debt.

Spain:

For now, the markets have put Spain in Italy’s sovereign risk class when, in our view, it should be closer to Portugal and Ireland once its banking sector problems are recognised. We argued before that the EFSF should be much larger (€2trn). Should Spain need assistance, it will stretch the resources of the EFSF, perhaps beyond its current limits. There may be some room to expand the size of the EFSF. But, in our view, once Spain needs assistance, the support of the ECB will be critical (by purchasing Spanish sovereign debt through its Securities Markets Program — SMP — and funding Spanish banks using Spanish sovereign debt or sovereign-guaranteed financial instruments as collateral or by making loans to or purchasing the debt of the EFSF, legally a limited liability company that could even be made an eligible counterparty of the Eurosystem for this purpose).

In the longer term, there may be a need for large-scale restructuring of the debt of the Spanish banking sector and possibly the sovereign. At longer horizons, high debt levels and political instability in Italy and Belgium may yet give rise to fundamentally warranted sovereign debt crises, while self-justifying crises are possible even in the near term, despite roughly balanced structural primary budgets.

And if you thought that the EU/IMF bailout marked the end of Ireland’s troubles, think again says Buiter:

Accessing external sources of funds will not mark the end of Ireland’s troubles. The reason is that, in our view, the consolidated Irish sovereign and Irish domestic financial system is de facto insolvent. The Irish sovereign cannot from its own resources ‘bail out’ the banks and make its own creditors whole. In addition, a fully-fledged bailout (permanent fiscal transfer) from EA partners or the ECB is most unlikely. Therefore, either the unsecured non-guaranteed creditors of the banks, and/or the creditors of the sovereign may eventually have to accept a restructuring with an NPV haircut, even if it is not a condition for accessing the EFSF or the EFSM at present.

Read the last paper for a photography of the Portuguese UNDESERVED mess. My comment.

WANTED: The criminal and idiot that invented

1) the €

2) and its imlementation without any integration process, and structural correction process;

in such a way as to throw the poor baroque, and decadent Portuguese people in such a mess – just because of the “social experiments” (à la Mao Zedong) and mistakes committed elsewhere; in Berlin and London, Washington DC and Wall Street. And in Bruxelles by whom? I can’t remember: was he a roman guy perhaps? Roman? Romanesque, in the sense attributed by Leopardi…

Abandoned Homes by Serrator

CC-BY-SA License

My Tube 4 You

A blog under CC_BY_SA License, ranging from Creative Commons to Commonalism: copigiro-copyleft, depression or recession?, ICT diffusion; Marx, Minsky and political economy; Simone Weil: socialism and spirituality.
This work is licensed under a Creative Commons Attribution-Share Alike 2.5 Italy License.